In power generation terms, that is the equivalent of constructing a large nuclear station, such as the UK’s proposed Hinkley Point C (slated for start up in 2027), in the space of four weeks, at about half the cost (1).

At current installation rates, by year-end China will be generating over 350 TWh of electricity using solar plus wind, which is more than the UK, the world’s sixth largest economy, consumes in total over a year.

It’s worth noting that in 2009, China generated practically no electricity from solar and wind at all, relying mainly on coal. In 2016, existing Chinese plans for over 120GW of new coal generation were cancelled.

This is how energy is changing.

As Liam Denning notes in his recent Bloomberg View, as overall energy demand flat-lines but new energy supply surges, there is now an intense rivalry between different energy sources – and it’s turning the head of investors:

“Capital likes dominance, but it also has an enduring affinity for growth”

Solar and Wind, Different in Kind from Other Energy

It’s convention to categorise wind and solar with nuclear and hydropower as “renewables”, due to their carbon-free nature.

But this confuses how wind and solar differ from other major energy sources – it’s their rapid, scalable, manufactured, high-growth nature that truly sets them apart.

This is because they have to combine two complex supply chains: one to make the fuel (think coal mines, oil and gas platforms and refineries, dams and uranium mines), and one to create the energy delivery system (think thermal power plants, gasoline stations, storage facilities, pressurized pipelines, hydropower and nuclear plants).

Because of this energy companies or utility providers tend to operate economically only by adding huge new increments of fuel or plant to generate enough energy volumes, over extended periods, to repay investments.

In turn this forces them to rely on giant custom-designed construction projects, which habitually over-run in cost and schedule, often dramatically.

As a result, they are inflexible to changes in energy demand, producing classic energy commodity cycles of over and under-supply: think OPEC’s current dramas in the oil market.

The dominant energy industries are all big, but they are extremely fragile – they can only scale up in single sizes, and scale down the same way.

Wind and solar are an opposite form of energy: they are manufactured, assembly-line technologies dedicated to simple, standardized components: PV solar panels and wind turbines.

They are fuel-free, relying on the efficient capture and conversion of the earth’s (infinite and in-place) solar and wind energy.

This makes them highly scalable: they can operate effectively at capacities from a few MW to several GW, over three orders of magnitude. Think roof-top solar, small-scale wind arrays, offshore giant turbines and the behemoth solar farms that China is now deploying.

And it means the energy they produce can be deployed quickly, and in phases, creating steady growth, with declining costs. In other words, flexible and robust.

Using BP’s Statistical Review, and focusing on the annual growth in consumption by each energy source, 2007-2016, the difference between dominant cyclical commodity energy and high-growth scalable energy becomes clear:

Note wind/solar’s steady growth versus the cyclical commodity energies: by the end of this year it’s almost certain that wind and solar will be the largest provider of global energy demand growth, at over 50% of the total.

The problem for single-size commodity energies is that as demand tends to zero, the ability to add any new capacity stops dead: one-off large additions are no longer required when solar and wind can provide widespread flexible supply.

Scalable Energy, Scalable Investment

In a new paper published in Nature, the authors note how even supportive agencies such as the Independent Panel on Climate Change (IPCC) and Greenpeace are underestimating the real-world growth of solar technologies – see below:

The paper forecasts that solar could provide up to 50% of the world’s electricity requirements by 2050. In that case, emissions would drop far below 50% pa, and the Paris target of 2°C becomes achievable as fossil fuel emissions are shoved aside.

Similarly wind technology is scaling rapidly; the average size of offshore UK turbines, at 8MW, is over twice the size of those originally installed just 10 years ago.

Solar and wind seem to be benefiting from positive reinforcement of capacity deployment and technical research – in turn accelerating cost and performance improvements above forecasts.